The vast majority of large and midsize companies and institutions offer health benefits as a way to attract and retain employees or because company officials believe it’s the right thing to do.
As a result, most Americans get their health insurance through their employers.
Now, with the Affordable Care Act poised to reshape how health insurance is delivered in this country, business owners, human resource officers and rank-and-file employees are left to wonder what health care reform means for them.
“They’re afraid to make a wrong move,” said Pamela Pawenski, Univera Healthcare’s regional vice president of sales.
There’s a lot of confusion about how the act will affect small, midsize and large companies – and their workers – as its key provisions go into effect over the next two years.
The act requires large employers to offer affordable, comprehensive insurance to their workers, but this rule was delayed until Jan. 1, 2015.
Smaller companies won’t have to provide health insurance, but some of those who do may be eligible for tax credits.
And some small employers may drop coverage for their workers, steering them to the state’s insurance exchange, where it is possible those workers may pay less for their insurance.
“This is the biggest change since Medicare was implemented in the ’60s. It affects everybody,” said Kathleen Armstrong, employee benefits manager with Evans Agency Insurance, which manages benefits for commercial clients.
While most people who now receive health insurance through an employer shouldn’t expect a change in their coverage next year, reports of companies seeking to avoid the large-employer mandate – by cutting staff or worker hours – have rippled through the media.
Locally, employers of every size are consulting with insurance brokers, representatives of their current insurer and other experts to plan for the future.
“You can be educated on the topic and still not have all the answers,” said Shannon K. Buffum, a labor and employment lawyer with Harris Beach.
The system of employer-provided insurance started during World War II, when companies began to offer health benefits as a way of getting around wage controls that made it hard to recruit employees.
Workers don’t have to count the value of their health benefits as income, and companies can deduct the cost of health insurance as a business expense.
The Affordable Care Act is meant to make health insurance more portable and to limit the blow when someone loses a job that offered insurance.
One concern is how large companies will respond to the act, which requires employers with 51 or more workers to provide health insurance to anyone working 30 hours per week – or pay a fine of $2,000 per employee, not counting the first 30.
This insurance must meet minimum standards of affordability and benefit levels. This mandate was to take effect Jan. 1 but was delayed for one year.
A related provision requiring large employers to track and report the insurance status of their workers also was delayed, potentially making it easier for the uninsured to sidestep the act’s requirement that everyone buy health insurance.
While most large employers already offer coverage to their full-time employees, for those that don’t there are fears that these companies would put off hiring new employees – or lay off an existing worker or more – to keep their payroll below 51 full-time workers. Or, companies could reduce the hours of workers to keep as many of them as possible below 30 per week.
Harris Beach’s Buffum is skeptical about health care driven hiring freezes – “If a person thinks it’s a wise business decision to increase their staff, they’ll do it,” she said.
But Raymond M. Nowicki, a certified public accountant, has heard about payroll game-playing.
“I’ve got a bushel of clients who are screening their employee base, and limiting employees to less than 30 hours of work, per week,” said Nowicki, managing partner with Nowicki and Company, a tax, accounting and business consulting firm.
Univera’s Pawenski said the formula included in the act to account for full-time employees would make it difficult to manipulate employee hours to dodge the large-employer mandate, but some employers who don’t may opt as a business decision to pay the penalty.
A February survey by the nonpartisan National Small Business Association of 400 employers with 50 or more workers found 71 percent planned to continue to offer health insurance and just 3 percent said they planned to pay the fine. “We’re not expecting things to change dramatically in the large group market,” Pawenski said.
In the small group market, there’s no requirement in the act that they provide insurance.
For those that do, however, they and their employees will see some changes, as more health plans bid on their business. “For small businesses, there are more choices that these businesses will have in 2014,” said Nora McGuire, Independent Health senior vice president and chief marketing officer.
But, she added, she expects most small employers to stick with their current insurers or insurance brokers for at least next year.
Employers with 50 or fewer workers may opt to direct their employees to buy insurance through the small-business section of the public exchange.
This option would be most attractive to companies with fewer than 25 employees, because they could be eligible for small-business tax credits. But not every small business would qualify and the tax credits are not permanent, officials said.
Still, New York expects 450,000 small-business employees to sign up on the small-business section of the state benefits exchange.
Further, it may make sense for some small businesses that offer insurance to drop their coverage and steer employees to the state’s individual exchange.
Those employees could end up paying less for their insurance because, on the individual exchange, they would be eligible for federal tax credits meant to lower the cost of their coverage.
“In certain circumstances, it will be to the employee’s benefit if their small-business employer does not offer them coverage,” said Gregory Pasieka, director of health care reform for BlueCross BlueShield of Western New York.
The Buffalo Museum of Science this year switched to a private exchange offered through Liazon Corp. to offer a more extensive menu of insurance options to its 35 full-time employees, who now can choose from five different Independent Health plan options, as well as dental and vision coverage.
“The benefit for us is that it’s not a one size fits all approach,” said Mark Mortenson, museum president and CEO. “The best analogy is as a cafeteria plan.”
Bauer Freight, a freight broker in North Buffalo, has two full-timers: managing partner Josh Bauer and his wife, Lindsay. Josh Bauer said he hires salespeople as independent contractors and would like to provide health insurance to them.
“We’re kind of waiting to see what happens with the Affordable Care Act and all the regulations,” said Josh Bauer.
Bauer said he buys coverage directly through BlueCross BlueShield at a group rate. But he and his wife still pay $793.70 in monthly premiums, up from $726 per month the year before.
“That’s not even top of the line,” he said. “And to top it all off, my wife’s pregnant. So we’ve been going to the doctor a ton.”
Some sole proprietors buy pool insurance through a chamber of commerce now, and the act eliminates this option.
Sole proprietors will be steered to the individual public exchange, where they may be eligible for a subsidy.
“They won’t be eligible for SHOP,” said Ashok Subramanian, CEO and co-founder of Liazon, referring to the state exchange’s small-business piece, “because they’re a single person. So they’ll have to go to the individual public exchange, or there may be private exchange options that target individuals.”
The Buffalo Niagara Partnership, which provides health benefits through a Liazon-powered exchange to about 800 people, including many sole proprietors, is preparing for the new health insurance landscape, said Craig Turner, a vice president with the partnership.
The partnership is hosting a series of seminars on health care reform and answering a lot of questions from its members.
Turner said the queries boil down to: “What do I have to do, and what do I have to know?”